Political Entrepreneurs

The Economic Engine of Political Change

March 2013

The IEA generously offered me the opportunity to contribute a blog post on the Guatemalan telecom reform. This is a slightly different introduction to the case study produced by the Antigua Forum, which Ed and I previously highlighted here . The IEA blog post provides a nice summary of the Guatemala experience, one of the most market-liberal telecom reforms in the world. Worry not, I will not be changing my regular blogging affiliations. Of course the IEA website is…Read more»

In his famous 1979 lecture, “Politics Without Romance,” James M. Buchanan briefly summarizes public choice theory and some of its implications. He puts special emphasis on viewing government as made up of individuals who respond to incentives in the decisions they make. This is contrary to the naive view of government that was implicitly assumed before public choice came along. That naive view would go something like this: 1. identify a market failure (defined as…Read more»

A recent Washington Post op-ed by Robert Samuelson argues that both Democrats and Republicans are hesitant to address some of the biggest problems affecting the federal budget. It’s a nice primer on the political economy of government spending (whether or not you agree with the policy recommendations). Money quote: What frustrates constructive debate is muddled public opinion. Americans hate deficits but desire more spending and reject higher taxes. In a Pew Poll, 87 percent of respondents…Read more»

I argued last time that an ideal measure of a think tank’s effectiveness would be its marginal effect on the marketplace of ideas. I also argued that, while conceptually simple, this ideal measure is impractical for a number of reasons. A simpler measure? A simpler measure would be funds raised through non-politicized (usually private) donations. This has the feel of a market test, in the sense that a donation indicates value created for the donor (otherwise, they…Read more»

This year marks the 100th anniversary of Richard Nixon’s birth, so it’s not surprising that the 37th President of the United States has been in the press. This post argues that Nixon is interesting and relevant as a madman in authority — that is, as a political leader who was both brilliant and deeply flawed. His influence continues to permeate American politics. Recent additions to the Nixon genre focus relatively early in this politician’s career,…Read more»

The Public Choice Society 50th Anniversary meetings in New Orleans concluded yesterday. It was a very special, productive occasion. The tributes to James Buchanan and Elinor and Vincent Ostrom were a nice mix of touching remembrance and serious reflection. The conference has been extremely well-organized. Pete Boettke posted the following comments : Congratulations to Public Choice Society President Edward Lopez for putting together what promises to be a very interesting and engaging conference. Public Choice is…Read more»

In April, 1963, James Buchanan and Gordon Tullock organized an interdisciplinary conference of scholars from economics, political science, sociology, and law. Their topic — which leveraged the success of Buchanan’s and Tullock’s 1962 book, The Calculus of Consent — was the rational analysis of politics. A second conference followed the next year, and the proceedings were printed in an edited volume. A third conference followed. And soon the nascent group of odd-ball scholars were gaining…Read more»

The Antigua Forum recently released a case study on telecom reform in Guatemala. Like a lot of studies, this one takes a careful look at the policies that were changed and the effects of those changes. Unlike a lot of other studies, it digs deep to examine the ideas that were behind the reform and how such reform was made possible. The full study is available here . And here’s an excerpt from the preface: In…Read more»

In an initial post last week , I argued that the proliferation of think tanks over the past 50 years is likely to be a good influence on human affairs, and so is the emerging competition to measure (rank) the performance of think tanks. In this follow-up post and a planned third, I will question the usefulness of the measures used in these rankings. Why measure think tank effectiveness with data like social network impact, web traffic, publication counts, and…Read more»

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From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.189, ch.7)

The most successful entrepreneurs know what they do well, they know the market and the opportunities within it, and they choose those activities that create the most value. This is true in economic as well as political markets.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.178, ch.7)

[W]hen the right elements come together at the right time and place and overwhelm the status quo, it is because special people make it happen. We call them political entrepreneurs.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.176. ch.7)

While we started this book with Danny Biasone saving basketball, we end it with Norman Borlaug saving a billion lives. These stories are not that different. Both faced vested interests, which were reinforced by popular beliefs that things should be a certain way—that is, until a better idea came along.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.174, ch.6)

Because there was a general belief that homeownership was a good thing, politicians found the public with open arms.... Everybody was winning—except Alfred Marshall, whose supply and demand curves were difficult to see through the haze of excitement at the time, and except Friedrich Hayek, whose competition as a discovery procedure was befuddled... In short, once politicians started getting credit for homeownership rates, the housing market was doomed.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.166, ch.6)

Everyone responded rationally to the incentives before them. In short, the rules that guided homeownership changed over time, which in turn changed the incentives of these actors. And bad things happened.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.153, ch.6)

They understood the economics. The ideas had already won in ... the regulatory agency itself. All that remained to be overcome were some vested interests and a handful of madmen in authority.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.146, ch.6)

If the idea for auctions of spectrum use rights had been part of the public debate since at least 1959, why didn’t the relevant institutions change sooner? What interests stood in the way?

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.121, ch.5)

When an academic scribbler comes up with a new idea, it has to resonate well with widely shared beliefs, which in turn must overcome the vested interests at the table. Many forces come together to explain political change, even though it may seem like coincidence of time and place.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.120, ch.5)

It’s the rules of the political game that deserve our focus, not politicians’ personalities or party affiliations.

From the Pages of Madmen, Intellectuals, and Academic Scribblers (p.119, ch.5)

In short, ideas are a type of higher-order capital in society. Like a society that is poor in capital and therefore produces little consumer value, a society that is poor in ideas and institutions will have bad incentives and therefore few of the desirable outcomes that people want.